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�r�� f �4�s��, ��rarr�s�� City Risk-Reward Spectrum Risk-Reward Spectrum high � ra . . . - - — � - � � — -- �---- - - - . . . . .,-• .� ..�•,� �r. •Y • �" ' . , .-�: �� •r ti....�. , - � : '�' �'=� -. - - --µ,-��i�.�t,=„��.__�. � • �-+• ' �,. a .�--- - � �-_'`'j" � ;.J '-_ -x �' � ��'-�`��'� • . i i �� ' ' . -. t�� ,� , ��'�'�''� • II � ' -i3�-.. - : �� _ ' . _ �+' . - • - � +�+�r�+�r� +' � r . � . .t. ' � r .L _ �+. , � �r. .•.'•� � - •��--'•- - -- -�r- � . . ' . . � ' . . � � _ r� . . � _ � -- .� ._.,�e��. - — � ' �� . - — � � � --• -�- � - - • - � � ••--- � ..--- �.._ .. . ._ , * � . — �,. z.. . Y S F' . � � � � ' � � ..�. 0 2 4 6 8 10 �� high Reward � The graph above illustrates the challenges of public sector redevelopment projects. A City ideally wants to attract a project which fits into the bottom � right hand corner, where risk is limited and rewards are high. Developers, for the most part, also want to provide a low risk/high reward project for the community, but that is not their primary objective - which is to make an adequate return on investment. Developers are keenly aware of the reward side of the equation. They often believe that as a project provides more of the benefits a City desires, the City should bear more of the risk to make it happen. In most cases, a developer will strive to shift risk away from itself and transfer it to other parties. It is for this reason that risk and reward are unlikely ever to be mutually exclusive — that is, the two will usually move in union with each other. This relationship is similar to a personal investment portfolio, where a high reward often requires higher risks. Because of the subjective nature of the discussion of risk, it is impossible to quantify. What one person might deem "risky" may not be by another. Also, one person might consider 50 professional jabs as "high reward", while another may not. What we hope to accomplish in the illustration above is to depict the subjective nature of this exercise. Keep in mind that the chart depicts risk-reward from the �� perspective. If we were to describe specifically, down to very technical details, each of the scenarios used to plot points A through E above, various individuals would certainly assign a different value for that project on the chart. However, in the final analysis we would conclude that those projects lying closest to the blue line are more likely to occur than those lying further away. Risk, used in the context of this discussion, does not have to be entirely � related to using economic development tools or selling bonds. For example, the Council may consider the risk involved in simply not taking any action to SPRINGSTED Page 24